Competition concerns flagged over NBN agreements

Commercial agreements struck between nbn, the company rolling out Australia’s National Broadband Network (NBN), and the country’s largest telco, Telstra, could hamper competition in the local fixed broadband market, according to the Australian Competition and Consumer Commission (ACCC).

In a report published on 2 September, the competition watchdog outlined its concerns in relation to service delivery agreements, struck between the two companies late last year, for the supply of network activation and assurance services, as well as network planning, construction, and management services.

“NBN Co and Telstra have said that one of the benefits of these commercial agreements is that it will facilitate a faster rollout of the NBN, which the ACCC acknowledges, but we also recognise that there are potential competition implications, and the effect of these on end users is just as important,” said ACCC chairman, Rod Sims, in a statement.

The report outlines the ACCC’s concerns that the agreements may give Telstra a “head start” in connecting customers to NBN hybrid fibre coaxial (HFC) broadband services, preferential service activation or repair of NBN broadband services for its own customers, and greater insight than its competitors into the NBN rollout.

“In the ACCC’s view, if this was to occur, Telstra would be in a much better position relative to its competitors to offer superfast broadband services, better target its marketing and lower its customer acquisition costs, and better tailor its customer experience on the NBN relative to its rivals,” the ACCC said.

The ACCC said, while it recognises that the purpose of the agreements is to speed up the rollout of the NBN, they potentially introduce impediments to the emergence of more competitive fixed-broadband markets, which is one of the outcomes the NBN is expected to deliver.

“In this context, it is important to ensure NBN Co’s ongoing compliance with its statutory non-discrimination obligations,” the report stated.

For their part, nbn and Telstra have identified a number of measures in the agreements designed to mitigate the potential for Telstra to gain an advantage over other broadband payers.

These include several conditions: that nbn will generally install new HFC connections only after all other providers can order NBN services in an area; that nbn will set priorities on the activation and assurance work it allocates to Telstra; and that Telstra provide a white label activation and assurance service to nbn that ensures its field workforce follow non-discrimination rules when attending end-user premises.

Despite the assurances by Telstra and nbn, the ACCC said it believes that the agreements may still hamper competition in the industry.

“The ACCC’s view is that the agreements could still pose a significant risk of distorting or otherwise lessening competition in the supply of broadband services unless all NBN access seekers are equally able to plan the commencement of their services over to the NBN, and unless Telstra carries out the activation and assurance work for NBN Co in a way that does not disadvantage other NBN access seekers,” the ACCC stated.

The competition watchdog said it is continuing to work with nbn to ensure that all potential NBN end customers have equivalent access to rollout information before the NBN construction program in the Telstra HFC footprint begins to scale up.

The agreements between the companies are related to a larger deal for nbn to use Telstra’s existing HFC and copper networks in a bid to expedite the rollout of the NBN under the government’s Multi Technology Mix (MTM) approach.

In its latest annual corporate plan, nbn revealed that it was easing back on its reliance of existing HFC infrastructure in its rollout of the network, citing rising costs associated with using the technology. The number of premises expected to be connected via existing HFC networks dropped from 4 million to between 2.5 million and 3.2 million.

The decision followed the leak of an internal nbn document which suggested that the HFC network assets the company acquired from Australia’s second largest telco, Optus, were “not fit for purpose”.

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